Couple claim bias in judgment

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NEW YORK (AP) – How much does it pay to hide your family’s photos in your home or anything else that shows your race? If you’re black and want to find out how much your home is worth, one family suggests it could be in the hundreds of thousands of dollars.

A couple in Baltimore is suing an appraiser and a mortgage company because their home is grossly undervalued because they are black, preventing them from refinancing their mortgage. The couple say a separate appraisal, conducted after the home was “whitewashed” by removing family photos and having a white colleague stand in for them, put the home’s value $278,000 higher.

The two “were shocked by the rating and realized that the low rating was due to racial discrimination,” according to the lawsuit, filed earlier this week in U.S. District Court in Maryland.

Officials at the lender accused in the case, LoanDepot, declined to discuss the allegations. However, in a statement, the publicly traded company said it firmly rejects bias. “While appraisals are conducted independently by outside appraisal experts, everyone involved in the home finance process must work to find ways to help eliminate bias.”

The valuation company in the case, 20/20 Valuations, could not be immediately reached for comment. Neither she nor the individual expert named in the lawsuit have previously listed attorneys in the court filings.

The situation began last year when two Johns Hopkins University professors, Nathan Connolly and Shani Mott, wanted to do what millions of others were doing across the country. They hoped to take advantage of low interest rates and refinance their mortgage and home loan.

The couple bought their four-bedroom home in 2017 for $450,000 and made several upgrades. For example, they remodeled their club room for $35,000. They also invested in a water heater, recessed lighting and other improvements that family lawyers said added value to the home.

This would come on top of the general increase in property prices in the region and across the country between 2017 and 2021.

The couple applied to LoanDepot in mid-2021, which initially gave them a 2.25% interest rate pending an appraisal to ensure the home was worth enough in the event of a default. A LoanDepot loan officer told the family a “fairly conservative” estimate was $550,000, the lawsuit says.

But the appraiser from 20/20 Valuations hired by LoanDepot said the home was only worth $472,000, according to the complaint. That prompted LoanDepot to call and say it wouldn’t renew the loan, according to the complaint.

The lawsuit alleges that in researching other homes to compare to the plaintiff’s home, the appraiser ignored nearby sales in majority white areas that had higher values ​​similar to the plaintiff’s. Instead, the complaint said he included lower-value homes and those in areas with more black residents.

Later that year, the couple learned that the government valued their home at $622,000. Then they tried another loan. This time, they conducted an experiment in which they replaced family photos with ones borrowed from white friends and colleagues. They even brought new artwork, including a vintage print of a “white pin-up model.” And they made sure not to be at home during the assessment, instead having a white colleague who greeted the assessor.

The home was then appraised at $750,000, or 59% more than the appraisal less than seven months earlier.

“It’s shocking to a lot of people that a home should be an objective appraisal, but when the appraiser appraises it assuming it’s a Black-owned home, it gets a value, and all of a sudden it’s 50% worth more if the appraiser believes it’s a white home,” said John Relman of the Relman Colfax law firm, which represents the plaintiffs.

“You have two outstanding professors at Johns Hopkins. They did everything they were told,” Relman said. But “Rating discrimination is so nuanced and so pernicious that it literally follows them into this predominantly white neighborhood. And unlike their neighbors, they don’t have access to the rising value they should be benefiting from.”

The US housing industry has a long history of racial discrimination that helped create the racial wealth gap and continues to this day. Last year, on the 100th anniversary of the Tulsa race massacre, President Joe Biden said he was launching a multi-agency initiative to combat bias in home valuations.

It is a story with which the plaintiffs are well acquainted. Connolly has written a book about how property ownership helped set the terms of Jim Crow’s breakup between the early 1900s and the 1960s. Mott has written on African American and American literature and history.

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